It is not uncommon for individuals to take on cosigners for their loans. Cosigners put a lot on the line when they agree to take on this responsibility, but the greatest risk of all is that an individual may go bankrupt down the line. Read on to discover how a bankruptcy filing may affect your cosigner and how a seasoned Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can offer protection.
What is a cosigner?
When you first work forward financial independence, you may not qualify for loans on your own. Instead, lenders may request that you include a cosigner before agreeing with you. This is so lenders can feel more secure in knowing that, should there come a time when you can pay back the loan, the cosigner will take full responsibility for picking it up. What’s more, lenders may even agree to more attractive terms for your loan or even a higher loan amount if you obtain a cosigner.
A cosigner may be a family member, a friend, or otherwise a loved one who is willing to put their credit report at risk to help you out.
How does Chapter 7 bankruptcy affect my cosigner?
The truth is that your Chapter 7 bankruptcy filing may significantly affect your cosigner. In Chapter 7, some of your debt may be eligible for discharge, such as your credit card debt, your medical bills, and your unsecured personal loans. With this, the Kentucky bankruptcy court will protect you from lenders coming after you for repayment.
Unfortunately, the bankruptcy court may not offer the same relief or protections for your cosigner. Meaning, they may still be pursued by and harassed by lenders for the repayment of these discharged debts.
How does Chapter 13 bankruptcy affect my co-signed debts?
Of note, filing for Chapter 13 bankruptcy may offer better support for your cosigner. This is because, in Chapter 13, you will be required to establish and follow a structured repayment plan for your debts that cannot be discharged, such as your home mortgage, certain taxes, and government-funded loans. With this, lenders cannot participate in collection activities because they will be receiving payments through the ongoing plan. Overall, you will be taking responsibility for your debts instead of them falling on your cosigner’s shoulders.
With that being said, you must remain consistent with your payments and follow through with your plan. This is because, if you default on your repayment plan in any way, then your cosigner will have to suffer the consequences. Meaning, the lenders will be allowed to turn to them for paying off the debts.
In the end, a competent Louisville, Kentucky consumer bankruptcy lawyer is ready and willing to stand by your side throughout your bankruptcy proceedings. Contact Schwartz Bankruptcy Law Center today.